Jeff Sachs: But on the other hand...

by Dollars and Sense

Yesterday we posted Jeffrey Sachs' op-ed in The Guardian (U.K.) congratulating Obama for his genius in using the current crisis as an opportunity to reshape U.S. capitalism toward public investment and a centrally planned transformation to new technologies.

Thanks to Lynn Fries for pointing out that just one day earlier, Sachs had come down hard on Obama's immediate plans in an op-ed in the Financial Times titled "The stimulus is a fiscal straitjacket."

The US debate over the fiscal stimulus is remarkable in its neglect of the medium term—that is, the budgetary challenges over a period of five to 10 years. Neither the White House nor Congress has offered the public a scenario of how the proposed mega-deficits will affect the budget and government programmes beyond the next 12 to 24 months. Without a sound medium-term fiscal framework, the stimulus package can easily do more harm than good, since the prospect of trillion-dollar-plus deficits as far as the eye can see will weigh heavily on the confidence of consumers and businesses, and thereby undermine even the short-term benefits of the stimulus package. ...

The most obvious problem with the stimulus package is that it has been turned into a fiscal piñata—with a mad scramble for candy on the floor. We seem all too eager to rectify a generation of a nation saving too little by saving even less—this time through expanding government borrowing. First it was former US Federal Reserve chairman Alan Greenspan’s bubble, then Wall Street’s, and now—in the third act—it will be Washington’s.

Headspinning for sure.

Read the entire piece here.

Labels: Barack Obama, economic stimulus, Jeffrey Sachs

 

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1/29/2009 11:16:00 AM